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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT #4
FORM 10-K/A
Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 (fee required)
For the fiscal year ended March 31, 1996
Commission File No. 0-14747
XYVISION, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
04-2751102
(STATE OR OTHER JURISDICTION
(I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)
IDENTIFICATION NO.)
101 EDGEWATER DRIVE, WAKEFIELD, MA 01880-1291
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 245-4100
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
COMMON STOCK $.03 PAR VALUE
PREFERRED STOCK PURCHASE RIGHTS
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Common Stock held by non-affiliates on May
31, 1996 was $1,888,878.
As of May 31, 1996, the registrant had 8,844,099 shares of Xyvision, Inc.
Common Stock, $.03 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
ITEM I TO THE REGISTRANT'S ANNUAL REPORT ON FORM 10-K IS HEREBY AMENDED AND
RESTATED TO READ IN ITS ENTIRETY AS SET FORTH BELOW.
ITEM 1. BUSINESS
GENERAL
Xvyision, Inc. ("Xyvision" or the "Company") develops, markets, and
supports advanced software for document management, publishing, and prepress
applications. The Company combines its software with standard computer
hardware, selected third-party software, and support services to create
tightly integrated systems to improve productivity and strategic position.
Xyvision markets and supports its software worldwide.
Xyvision offers two products -- Xyvision Production Publisher(Trademark)
and Parlance Document Manager(Trademark) ("PDM") -- as the core technologies
in systems for document management and publishing applications ("Xyvision
Publishing Systems"). These systems are used to automate the production of
reference books, journals, catalogs, directories, financial and legal
materials, and technical manuals.
Xyvision's color electronic prepress applications ("Contex Prepress
Systems") are based on Xyvision's Contex(Trademark) product line. Contex
Prepress Systems are marketed primarily to commercial trade shops, printers,
and prepress service organizations, as well as to consumer goods companies,
advanced design firms, and packaging manufacturers.
OVERVIEW
Xyvision released an enhanced version of its compound document management
software, Parlance Document Manager (PDM 2.3), in the third quarter of fiscal
1996. PDM 2.3 contains powerful new features that further enhance the users'
ability to leverage document-based information assets for strategic
advantage. Key features include full text retrieval, incorporating Verity's
Topic search engine; an enhanced Windows client, which supports a variety of
Windows third-party editorial and graphics tools; a PDM agent, an automated
PDM user that performs batch functions on projects without user intervention;
and Standard Generalized Markup Language ("SGML") utilities that enhance
PDM's SGML support by automating the configuration of SGML-based PDM
hierarchies.
In the fourth quarter of fiscal 1996, Xyvision announced an
Adobe(Trademark)FrameMaker+SGML(Trademark) and PDM Publishing Solution. The
integration of these two products will provide corporate and commercial users
a complete environment for managing the creation, revision, storage,
workflow, and electronic assembly of such documents as proposals, journals,
and technical documentation.
New PDM customers in fiscal 1996 include Aerospace Systems of Australia
(ASTA), Butterworths of New Zealand, Congressional Information Services, CTA
Incorporated, Defense Logistics Services Center, Embraer (Brazil), General
Dynamics Land Systems, Griebsch Rochol (Germany), McDonnell Douglas
Aerospace, Reed Technical Information Services, Royal Australian Air Force,
and the Swiss Air Force. Xyvision also received several orders for system
expansion from existing PDM customers.
Xyvision announced a major upgrade to its high-speed batch and interactive
composition system, Xyvision Production Publisher 5.0 (XPP), in the fourth
quarter of fiscal 1996. This major upgrade adds
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high-resolution interactive Display PostScript technology to the most
powerful and versatile professional publishing system available today. In
addition, XPP 5.0 features new technology for creating documents in Adobe's
Portable Document Format (PDF) and tools to easily convert Xyvision documents
to the Hypertext Markup Language (HTML) for electronic publishing on the
World Wide Web. Formerly called Xyvision Parlance Publisher, Xyvision changed
the name of this product to Xyvision Production Publisher with this release
to more accurately reflect the product's strengths.
New XPP customers in fiscal 1996 include the British Medical Association,
Cotter/True Value, Hearst Motor Co., and IBM worldwide. The Company believes
that the interest in Xyvision Production Publisher continues due to its
superior automation capabilities and to a fewer number of competitors in the
high-end publishing system arena.
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In fiscal 1996, the Company continued its effort to broaden geographic
distribution of its Contex product line. This program, called Contex Prepress
Partners(Trademark), had an objective of establishing a worldwide network of
value added resellers with appropriate applications support and systems
integration skills to resell Contex and complementary products and services
to customers in their territory. In fiscal 1996, the Company was able to add
Contex Prepress Partners in Korea, South Africa, additional countries in
Europe, and additional regions in the United States.
During fiscal 1996, in response to decreasing revenues and increasing
losses from operations, the Company incurred significant restructuring
charges in the quarter ended December 31, 1995 relating to a workforce
reduction. This action had its greatest impact on the sales, marketing and
administrative groups, particularly in the Contex operations. Additional
significant charges were incurred in the fourth quarter associated with the
adjustment of asset valuation reserves for accounts receivable, inventory and
capitalized software.
As a result of the restructuring, the headcount at the end of fiscal 1996
was 155, down from 171 at the previous fiscal year end. The Company's plan
for fiscal 1997 is to increase headcount on a selective basis as warranted.
Additionally, the Company will supplement its manpower needs by utilizing the
services of skilled consultants as deemed appropriate.
During the fourth quarter of fiscal 1996, the Company amended its line of
credit agreement with a current investor in the Company increasing the line
of credit from $3,000,000 to $4,000,000. This line, which is secured
essentially by all the assets of the Company, is being used and will continue
to be used for general working capital purposes.
In fiscal 1992, Xyvision initiated a program to restructure the Company's
6% Convertible Subordinated Debentures due 2002 (the "Debentures") by issuing
promissory notes and/or shares of common stock in exchange for the
cancellation of the Debentures. To date (June 28, 1996), Xyvision has
completed transactions to restructure $18,790,000, or 84% of the $22,410,000
Debentures outstanding at the beginning of fiscal 1992. To date, the Company
has identified the holders of an additional $2,260,000, or 10% of the
Debentures, leaving $1,360,000, or 6% of the Debentures outstanding at the
beginning of fiscal 1992, not identified.
During the course of its attempts to restructure the Debentures and
negotiate transactions with Debentureholders, the Company did not make the
interest payment due on the Debentures on May 5 of 1992, 1993, 1994, 1995, or
1996.
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Under the terms of the Indenture covering the Debentures, the Trustee or
the holders of not less than 25% of the then outstanding principal amount of
Debentures have the right to accelerate the maturity date of the remaining
Debentures. To date (June 28, 1996), such acceleration has neither occurred
nor been threatened. Additional information about the history and status of
Xyvision's Debenture restructuring efforts can be found in Part II of this
Form 10-K.
The Company continues to negotiate in good faith with as many of the
remaining Debentureholders as possible. However, despite the progress that
has been made, the Company can still give no assurance about the outcome of
the Debenture restructuring efforts and does not expect the matter to be
resolved in the near future. If the Company is unable to enter into
restructuring transactions with the remaining Debentureholders, and such
Debentureholders seek to pursue legal remedies against the Company, the
Company may have to seek protection under applicable laws, including the
Bankruptcy Code, while it develops, analyzes, and completes alternative
restructuring strategies.
For a further discussion of the line of credit, the Debentures and other
debt of the Company, please refer to Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations and Item 8,
Financial Statements and Supplementary Data.
XYVISION PUBLISHING SYSTEMS
Xyvision Publishing Systems are designed to help users meet their business
and publishing needs by providing comprehensive publishing solutions that
automate the publishing process, enable output to both paper and electronic
media, and provide power and speed unattainable with desktop products. These
systems allow users to operate in a multi-vendor networked computing
environment; transparently share, reuse, and manage text and graphics data
from multiple sources throughout an organization; maximize productivity by
using the appropriate computer platforms and applications; and retain their
investments in existing hardware, software, and training. Xyvision develops
and markets two high-performance, open publishing solutions: Parlance
Document Manager and Xyvision Production Publisher.
Parlance Document Manager (PDM) addresses the information needs of today's
corporate and commercial publishers: managing large amounts of information,
publishing information in both paper and electronic media, and leveraging the
value of information by enabling information reuse in multiple products. PDM
is a client/server compound document management system that stores document
elements as information objects in a central database, allowing these
elements to be shared and reused in multiple documents. It supports objects
of varying types and sizes, and manages a wide variety of text and graphics
formats including SGML (Standard Generalized Markup Language) and popular
UNIX or Windows word processing formats. In addition, PDM provides version
control, built-in workflow, and content management that automate editorial
processes for complex publishing projects.
PDM is well suited for publishing environments with large amounts of text,
graphics, and other data that are formatted and published in multiple
versions or output in both printed and electronic format. It allows customers
to produce existing publications more accurately and cost-effectively, and
provides additional revenue opportunities by enabling users to create new
products from existing information and on new output formats.
Xyvision Production Publisher (XPP) shortens production cycles and reduces
costs by automating composition and pagination of high-volume,
typographically-demanding documents. XPP offers a powerful solution for
corporate and commercial publishers who want to streamline and automate the
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production of complex documents--from the input of text and graphics to the
output of fully composed and paginated pages, film separations, or electronic
output. Advanced features include batch composition, interactive Display
PostScript editor, automatic import and placement of graphics, spot and
process color specification, powerful tabular and math composition, extensive
footnoting capabilities, automatic looseleaf composition, commercial-quality
typographic controls, and output in multiple formats including HTML for the
World Wide Web and PDF-enabled PostScript for Adobe Acrobat.
The Company believes the speed, power, and background processing
capabilities of Xyvision Production Publisher make it the most versatile and
powerful composition system available today. XPP enables customers to
significantly shorten production time and reduce costs associated with the
publishing process.
Xyvision also provides customers with a comprehensive customer support
program that includes systems integration, production analysis,
implementation planning, on-site and classroom training, applications
support, program management, remote diagnostics, and field service and
support.
Xyvision Publishing Systems are currently sold for UNIX-based servers and
workstations from Sun(Registered Trademark) Microsystems and IBM(Registered
Trademark). Xyvision also offers PDM Windows client software running under
Microsoft(Registered Trademark) Windows(Trademark). Xyvision's support of
standard hardware platforms gives customers the advantages of superior price
and performance, leading-edge technologies from major computer vendors, and a
growth path for future expansion.
CONTEX PREPRESS SYSTEMS
The Contex family of color electronic design and prepress software
automates full-color design, stripping, and page assembly operations used to
produce packaging, inserts, advertisements, brochures, catalogs, and other
high-quality color printed materials.
For design environments, Contex systems feature the ability to take a
design from initial concept through full-size "comprehensives" to final
mechanical art, all from the same electronic data. The user can bring
together design elements such as text, graphics and multi-color backgrounds
and connect and integrate them with a variety of sizing, cropping, masking,
overlay, and special effects facilities.
Contex systems also provide the sophisticated color image processing
needed to generate output films, called separations, used in the printing
process. These separations are generated by a wide variety of film plotters
and printing plate plotters made by other companies that connect directly or
indirectly to a Contex system.
If desired, full-size, full-color, hard-copy proofs can be generated to
aid in design evaluation, review, and approval processes. For package
designs, three-dimensional mock-ups can be created. Synthetic imaging can
also be created to show a new package design on a store shelf alongside
competing products.
While Contex systems provide capabilities to enhance the generation of
quality color materials, they are primarily purchased to improve
productivity. Contex software operates on UNIX-based RISC workstations and
servers from Silicon Graphics(Registered Trademark), Inc. This hardware is
used because of its leading capabilities for interactive manipulation of
complex color images.
MARKETS, APPLICATIONS, AND CUSTOMERS
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WITHIN THE BROAD MARKET FOR COMPUTER-BASED ELECTRONIC PUBLISHING, INFORMATION
MANAGEMENT, AND PRINTING TECHNOLOGIES, THE COMPANY TARGETS ITS MARKETING
EFFORTS PRIMARILY TO THREE KEY APPLICATION SEGMENTS: (1) TECHNICAL
DOCUMENTATION, (2) COMMERCIAL PUBLISHING, AND (3) COLOR ELECTRONIC DESIGN AND
PREPRESS APPLICATIONS.
TECHNICAL DOCUMENTATION is produced by corporations and product manufacturers
in support of a product or service. The application segment includes
aerospace, automotive, heavy equipment, computers, electronics, and
transportation companies who publish such documents as maintenance manuals,
transportation directories, and software documentation. These publications
often have a long shelf life, need frequent revisions, and require output in
a variety of formats including Interactive Electronic Technical Manuals
(IETMs), Standard Generalized Markup Language (SGML), Hypertext Markup
Language (HTML), Portable Document Format (PDF), and looseleaf paper manuals.
COMPANIES THAT PRODUCE TECHNICAL DOCUMENTATION OFTEN PRODUCE MANUALS IN
LOOSELEAF FORMAT AND DISTRIBUTE UPDATES AS LOOSELEAF CHANGE PAGES. XPP'S
UNIQUE AUTOMATIC LOOSELEAF OPTION ENABLES COMPANIES TO AUTOMATICALLY CREATE
UPDATE PAGES WHEN NEW INFORMATION IS ADDED TO PREVIOUSLY RELEASED DOCUMENTS,
ENABLING USERS TO DISTRIBUTE ONLY CHANGED PAGES INSTEAD OF REPRINTS OF THE
ENTIRE DOCUMENT. THIS CAN DRAMATICALLY REDUCE PRINTING AND WAREHOUSING COSTS,
AND ALLOWS MORE TIMELY UPDATES OF TECHNICAL INFORMATION.
XYVISION CUSTOMERS IN THE TECHNICAL DOCUMENTATION SEGMENT INCLUDE: BOEING
HELICOPTERS, CONSOLIDATED FREIGHTWAYS, CUMMINS ENGINE, EMBRAER (BRAZIL),
GULFSTREAM AEROSPACE, MCDONNELL DOUGLAS AEROSPACE, FORD MOTOR CO., PRATT &
WHITNEY CANADA, RAYTHEON SERVICE COMPANY, ROYAL AUSTRALIAN AIR FORCE, TWEDDLE
LITHO, AND SIKORSKY AIRCRAFT.
COMMERCIAL PUBLISHING includes commercial printers and trade service bureaus,
book and journal publishers, legal publishers, professional associations,
financial services and insurance companies, government agencies, and
wholesale distributors. In order to remain competitive, service providers
must offer a variety of services in support of document production and
delivery.
COMMERCIAL PUBLISHERS, SUCH AS LEGAL PUBLISHERS AND PROFESSIONAL
ASSOCIATIONS, HAVE INCREASINGLY BEEN FACED WITH THE NEED TO BETTER MANAGE
INFORMATION CONTENT, VERSIONS, AND WORKFLOW. XYVISION'S PDM PROVIDES THESE
COMPANIES WITH A COMPLETE INFORMATION MANAGEMENT SOLUTION THAT REDUCES COSTS,
SHORTENS THE PRODUCTION CYCLE, AND ENABLES CUSTOMERS TO GENERATE NEW REVENUE
BY REPACKAGING EXISTING INFORMATION INTO NEW PUBLICATIONS OR MEDIA.
XYVISION CUSTOMERS IN THE COMMERCIAL PUBLISHING SEGMENT INCLUDE AAA, ASTM,
AMERICAN INSTITUTE OF PHYSICS, AMERICAN CHEMICAL SOCIETY, AMERICAN MEDICAL
ASSOCIATION, BUREAU OF NATIONAL AFFAIRS, CADMUS JOURNAL SERVICES, CAPITAL
PRINTING SYSTEMS, FACTS AND COMPARISONS, GRAFIKON (BELGIUM), IDEA INSTITUTE
(JAPAN), MERCK & CO., R.R. DONNELLEY & SONS, REED ELSEVIER, TVSM, VALUELINE,
INC. AND VERMANDE BV (HOLLAND).
COLOR ELECTRONIC DESIGN AND PREPRESS APPLICATIONS SEGMENT. This market
segment consists of commercial trade shops, printers, packaging convertors,
prepress service companies, consumer goods companies, and independent and
in-house design organizations that specialize in packaging, advertising,
catalogs, brochures, promotional displays and similar printed material that
involves complex layout of color elements.
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For commercial trade shops, printers, and prepress service companies, the
production of catalogs, brochures, posters or ads involves assembling job
elements and page geometries into a high-quality, finished, printed piece.
Typically, these organizations receive data from their clients in a variety
of formats during various stages of the production cycle.
Design firms, packaging manufacturers and consumer goods companies are
responsible for creating packages, free-standing newspaper inserts, in-store
promotions, and other collateral for consumer product marketing. For these
companies, the challenge is taking an initial design concept through to
completion.
For each of these groups, success depends significantly on their ability
to make the path from design through production completely electronic. They
need to be able to create an open-systems environment that allows them to
accept data in any format, at any time and to manage projects and people for
efficient use of available resources.
Contex software is sold to general and packaging trade shops, general
printers, and packaging converters primarily to facilitate the color prepress
production processes. It is sold to package designers and consumer product
companies to facilitate the more interactive needs of designers. This
typically involves exploration of design concepts and alternatives, and
requires experimental, hands-on operations from designers.
Xyvision's customers in the color electronic design and prepress
application segment include: Akerlund & Rausing (Sweden), Banta/Color
Response, Field Packaging (U.K.), The Gillette Company, DAR Projects (U.K.),
Kimberly Clark, HEL Productions (Australia), Novacel (Mexico), Lincoln
Graphics, Prestige Graphics (Malaysia), Schawkgraphics,
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Scandicolor (Denmark), Schmalbach-Lubeca (Germany), Southern Graphics, and
Litho Plus (Canada).
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PRODUCT STRATEGY
The first half of the 1990s has seen important changes revolutionize the
document creation and distribution process. The impact of the Internet, World
Wide Web, and other electronic information dissemination technology has
transformed documents from static printed pages into dynamic, digital
repositories of text, graphics, and multi-media. Information providers in
both the commercial publishing and technical documentation arenas are faced
with such challenges as producing both printed and digital formats from the
same information source, efficiently creating targeted custom publications,
and managing the revision cycle of long-lived documents. In addition,
publishers and corporations must constantly find creative ways to cut costs
and accelerate turnaround.
Xyvision recognizes that today's customers demand an open system with
access to a wide range of products in an integrated environment. These
systems must meet a customer's current needs while still providing a sound,
flexible platform to meet their future needs in a rapidly changing
marketplace. Xyvision's product and business strategy reflects a commitment
to provide users with the tools to create this environment, which enables
them to leverage existing investments, implement an efficient operation, and
realize significant cost reductions and productivity increases.
Xyvision's product development will continue to embrance open-systems
technology and will focus on: (i) enhanced functionality; (ii) document and
information management; (iii) electronic delivery in a variety of media
including the World Wide Web; and (iv) integration with market-leading,
third-party products, which should broaden appeal across a wider market.
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SALES AND DISTRIBUTION
Xyvision Publishing Systems. In the United States and Canada, Xyvision
markets these products and services primarily through a direct sales force.
However, for larger document management systems, the Company is increasingly
marketing through and with large systems integrators. In Europe, Asia, and
Australia, these products and services are marketed and sold by independent
distributors with appropriate systems integration skills.
Contex Prepress Systems. Xyvision markets its Contex software and
associated services primarily through a worldwide network of value added
resellers with appropriate applications support and systems integration
skills. This distribution program is called Contex Prepress
Partners(Trademark).
International. The Company maintains a European sales and support
headquarters in England.
CUSTOMER SERVICE AND SUPPORT
Most of Xyvision's customers enter into maintenance and support contracts and
receive training. As part of a standard software support contract, the
Company provides software and documentation updates, as well as telephone
support. Each customer site is provided with remote diagnostics for the
identification, isolation, and resolution of problems. Hardware maintenance
is provided by the vendor who manufactured the hardware.
With over twelve years of corporate experience in integrating and delivering
solutions for a wide range of publishing environments, Xyvision consultants
are experts in analyzing and implementing large-scale document management,
publishing, and electronic delivery systems. Xyvision consulting includes
such services as process reengineering, document analysis, DTD development,
and Web consulting.
Revenues from customer service and support were 38%, 36%, and 42% of
overall revenues during fiscal 1994, fiscal 1995, and fiscal 1996,
respectively.
PRODUCT DEVELOPMENT AND ENGINEERING
The market for the Company's products is characterized by rapid
technological change that requires the continuing enhancement of existing
products and the development of new products. During the past three fiscal
years ended March 31, 1996, the Company's investments in product development
and engineering, before the capitalization of software costs, have been a
significant percentage (18-20%) of the Company's total revenues.
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In the future, the Company's product development efforts will focus on
continuing to enhance its open- architecture systems, increasing the
price/performance of its products and developing software for specific
application needs. The Company believes it will have to continue to invest a
significant portion of its revenues in development to remain competitive in
its markets.
COMPETITION
The markets for document management, publishing, and prepress systems are
highly competitive. Xyvision competes with a number of companies, and other
companies not currently in these markets may introduce competing products.
Many existing and potential competitors have significantly greater financial,
technical, and marketing resources than Xyvision.
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Competition is usually based on: (i) price/performance, (ii) functionality
differences, (iii) quality and extent of service and support, and (iv) the
financial strength of the vendor.
In the market segment for document management and publishing applications
for technical documentation, Xyvision principally competes with Documentum,
Interleaf, Texcel, and XSoft, a division of Xerox. In the commercial
publishing applications market segment, the Company's principal competitors
are CCI Europe, Miles 33, and Quark. In the prepress applications market
segment, the Company competes primarily with Barco/Disc, Dainippon Screen,
Linotype-Hell, Wright Technologies, Scitex, and a wide variety of desktop
packages from companies such as Quark and Adobe.
MANUFACTURING AND SUPPLIERS
Xyvision's Contex family of prepress systems is based on workstations and
operating systems from Silicon Graphics, Inc. The Company's document
management and publishing product lines work with operating systems from Sun
Microsystems and IBM (including IBM's power PC products). A significant
interruption in supply from these vendors would have a material adverse
effect on the Company.
BACKLOG
The Company believes that it is able to anticipate near-term demand for
its products and ship products shortly after receipt of the order.
Accordingly, the Company's backlog at any particular time is generally
neither significant nor indicative of future sales levels.
PATENTS, LICENSES, AND TRADEMARKS
The Company relies on copyright, patent, and trade secret laws to protect
its technology. Management believes that because of rapid technological
changes in professional publishing and color electronic design and prepress
technologies, patent, trade secret, and copyright protection is not as
significant to the Company's business as the technical and creative skills of
its employees.
Xyvision, PackageMaker, RIP'n'Strip, SmarTrap, and RoboRIP are registered
trademarks of the Company. The Company also uses the following trademarks;
Xyvision Production Publisher, Parlance Document Manager, Contex, Contex
Professional, Contex Prepress Partners, DotBox, and The Contex Object
Library.
The Company has acquired non-exclusive licenses for certain software from
several companies. These licenses permit the Company to grant sublicenses to
its customers. Loss of the Company's rights to grant sublicenses to its
customers on some of these software products could have a material adverse
effect on the Company.
EMPLOYEES
As of March 31, 1996, the Company employed 155 persons, which included 44
in research and development, 47 in sales and marketing, 46 in customer
support, and 18 in finance and administration.
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Xyvision's products are primarily proprietary software and services.
Software and services companies are commonly referred to as "intellectual
property companies." As an intellectual property company, management believes
that the future success of the Company will depend in large part on its
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ability to attract and retain qualified employees. Due to the competitive
market for skilled software engineers and other employees in the greater
Boston area, the Company from time to time experiences difficulty in hiring
and retaining personnel. The Company's employees are not represented by a
labor union, and the Company has never suffered an interruption of business
as a result of a labor dispute. The Company believes its employee relations
are good.
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PART III
Part III to the Registrant's Annual Report on Form 10-K is hereby amended
and restated in its entirety as set forth below.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item (i) is included in Part I of this
Annual Report on Form 10-K under the heading "Executive Officers and
Management of the Company", and (ii) is set forth below:
CLASS I DIRECTOR
JAMES S. SALTZMAN, age 52, has been the General Partner of Saltzman
Partners, an investment firm, since 1982. He served as Chairman of the Board
of Directors of the Company from February 1994 to February 1995. He has been
a director of the Company since 1992.
CLASS II DIRECTOR
THOMAS H. CONWAY, age 57, has been Chief Executive Officer of the Company
since 1991, President of the Company since December 1995 and from 1991 to
February 1994, and President of T.H. Conway and Associates, Inc., a
management consulting firm specializing in corporate operational and
financial remediation, since July 1993. From 1985 to June 1993, he was
President of Conway and Youngman, a management consulting firm. He has been a
director of the Company since March 1993 (at which time he was elected to
fill a vacancy in the Class II Directors) and has been Chairman of the Board
of Directors since February 1995. Prior to joining the Company in August
1991, Mr. Conway served as interim Chief Executive Officer of Smart Names,
Inc. A petition for involuntary bankruptcy under Chapter 7 was filed against
Smart Names, Inc. in the Bankruptcy Court for the State of Maryland on
February 28, 1992.
CLASS III DIRECTORS
LELAND S. KOLLMORGEN, age 69, has been the President of TLK Inc., a
business consulting firm, since 1983 and is a self-employed consultant. Rear
Admiral Kollmorgen (USN, Retired) is a consultant and former Chief of Naval
Research to the United States Navy. He has been a director of the Company
since 1988.
JAMES L. MCKENNEY, age 67, has been the John J. McLean Professor of
Business Administration at Harvard University since 1960. Mr. McKenney has
been a director of the Company since November 1994.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies or reports filed by reporting persons
of the Company pursuant to Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Company believes that all filings
required to be made by reporting persons of the Company were timely made in
accordance with the requirements of the Exchange Act, except that Mr. Borin
filed his Form 3 four months late and Mr. Woods filed his Form 3 two months
late.
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ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item (i) is included in the first
paragraph of Item 13 of Part III of this Annual Report on Form 10-K, and (ii)
is set forth below:
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive directors' fees of
$2,000 per year. Such outside directors also receive fees of $500 for each
Board meeting attended in person and $250 for each telephonic Board meeting,
and directors who are members of Committees of the Board receive fees of $250
per Committee meeting attended, provided such Committee meeting was not held
on the same day as a Board meeting. Directors are also reimbursed for
expenses incurred in attending Board or Committee meetings. Directors who are
employees receive no additional compensation for serving as directors.
Under the Company's 1992 Director Stock Option Plan, each newly elected
outside director is granted, upon his initial election as a director, a
non-qualified option to purchase 20,000 shares of Common Stock at an exercise
price equal to the fair market value of the Common Stock as of the date of
grant. Each option granted under the 1992 Director Stock Option Plan becomes
exercisable on a cumulative basis in five equal annual installments beginning
on the date of grant.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information concerning the
compensation, for the fiscal years indicated, of the Company's Chief
Executive Officer and the Company's four other most highly compensated
executive officers during fiscal 1996 (the "Senior Executives").
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------- ---------------
Options All Other
Name and Principal Position Fiscal Year Salary (1) Bonus (No. of shares) Compensation(2)
- -------------------------------------- ------------- ------------ -------- --------------- ---------------
1996 $182,200 $-- -- $---
Thomas H. Conway(3) President, Chief
Executive Officer and Chairman of the 1995 $141,200 -- -- --
Board of Directors 1994 $157,250 -- -- --
1996 $156,923 -- -- --
Daniel M. Clarke(4) Former President 1995 $149,654 30,000 60,000 --
and Chief Operating Officer 1994 $131,615 20,000 -- --
1996 $120,751 10,000 -- 1,221
James G. Hickey Vice President,
Customer Support, and Managing 1995 $120,751 -- 25,000 1,222
Director, Europe 1994 $120,751 20,000 -- 1,522
1996 $122,135 15,000 -- 1,221
Kevin J. Duffy Senior Vice President
and General Manager, Xyvision 1995 $119,741 20,000 10,000 1,349
Publishing Group 1994 $115,500 20,000 -- 1,304
1996 $116,768 -- 4,500 287
Paul J. Woods Senior Vice President 1995 $129,165 -- -- 323
and General Manager, Contex Group 1994 $125,800 -- -- 315
</TABLE>
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<PAGE>
(1) In accordance with the rules of the SEC, other compensation in the form
of perquisites and other personal benefits has been omitted because such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total annual salary and bonus for the Senior Executive.
(2) Consists of Company matching contributions to 401(k) Plan.
(3) The Company pays T.H. Conway and Associates, Inc., a management
consulting firm of which Mr. Conway is the President, directly for Mr.
Conway's services. See "Certain Transactions."
(4) Mr. Clarke served as President and Chief Operating Officer until
December 8, 1995. Includes severance payments of $43,269 pursuant to an
agreement between Mr. Clarke and the Company. See "Agreements with Senior
Executives".
OPTION GRANTS
The following table sets forth certain information concerning grants of
stock options during fiscal 1996 to each of the Senior Executives.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Potential
Realizable
Value at
Assumed
Annual
Rates of
Stock
Price
Appreciation
for Option
INDIVIDUAL GRANTS Term (3)
Number of Percent of Total
Securities Options Granted to
Underlying Options Employees in Fiscal Exercise or Base
EXECUTIVE OFFICER Granted (1) Year Price($/Sh)(2) Expiration Date 5% 10%
------------------- ------------------- ------------------- --------------- ----- -----
Thomas H. Conway -- -- -- -- $-- $ --
Daniel M. Clarke -- -- -- -- $ -- $ --
James G. Hickey -- -- -- -- $ -- $ --
Kevin J. Duffy -- -- -- -- $ -- $ --
Paul J. Woods 4,500 1.6 $0.95 8/16/05 $0 $ 0
</TABLE>
(1) Each option becomes exercisable in equal annual installments over a five
year period commencing on the date of grant.
(2) The exercise price is equal to the fair market value on the date of
grant.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term (ten years from
the date of grant). These gains are based on assumed rates of stock
appreciation of 5% and 10% compounded annually from the date the respective
options were granted to their expiration date. Actual gains, if any, on stock
option exercises will depend on the future performance of the common stock
and the date on which the options are exercised.
15
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth, on an aggregated basis, the exercise of
stock options during fiscal 1996 by each of the Senior Executives and the
fiscal year-end value of unexercised options held by such officers.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Number of Shares Underlying Value of Unexercised
Unexercised Options at Fiscal In-the-Money Options
Year-End at Fiscal Year-End (1)
SHARES ACQUIRED
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Thomas H. Conway 0 $0 300,000 0 $ 0 $ 0
Daniel M. Clarke 80,000 0 (2) 0 0 0 0
James G. Hickey 0 0 82,640 42,360 1,130 4,520
Kevin J. Duffy 0 0 71,801 38,199 560 2,240
Paul J. Woods 0 0 15,500 4,500 0 0
</TABLE>
(1) Based on the fair market value of the Common Stock on March 31, 1996
($.31 per share).
(2) Based upon the fair market value of the Common Stock on January 1, 1996
($.34375 per share) and on March 2, 1996 ($.26875 per share), the dates of
option exercise, less the applicable option exercise prices, Mr. Clarke had a
net loss of approximately $3,820.
AGREEMENTS WITH SENIOR EXECUTIVES
In 1990, the Company entered into agreements with Messrs. Clarke and
Hickey entitling such individuals to benefits under the Company's Severance
Program for Executive Committee Corporate Officers. Under this Program, an
employee whose employment is terminated by the Company involuntarily without
"cause" (as defined in the Program) is entitled to (i) a severance payment in
the amount of three months' salary; (ii) if he has not obtained other
employment within three months after his employment termination date,
bi-weekly salary payments for an additional period from such date until the
earlier of one year after his employment termination date or the date on
which he obtains other employment; and (iii) a continuation of medical,
dental and insurance benefits until the earlier of one year after his
employment termination date or the date on which he obtains other employment.
In addition, an employee whose employment terminates for any reason, whether
voluntary or involuntary, within three months following a "change in control"
(as defined in the Program) is entitled to receive the benefits described
above, and all outstanding stock options held by the employee shall
immediately become exercisable in full. The Program remains in effect for so
long as such individuals are employed by the Company (although
post-employment benefits expire one year after employment termination). Mr.
Clarke left the employ of the Company in December 1995 and is receiving
benefits under this Program.
The Company has an Employee Severance Benefit Plan in which all full-time
employees (including executive officers) who have been employed for at least
90 days participate. Under this Plan, if a "change in control" of the Company
(as defined in the Plan) occurs, and within 12 months thereafter a
participant's employment with the Company is terminated either by the Company
other than for "cause"
16
<PAGE>
or "disability" (each as defined in the Plan) or by the participant for "good
reason" (as defined in the Plan), then (i) the participant is entitled to (a)
a cash payment equal to 50% of his annual base compensation if he has been
employed by the Company for less than one year or 100% of his annual base
compensation if he has been employed by the Company for one year or more
(subject to reduction in certain events for tax reasons) and (b) a
continuation of certain insurance benefits for a period of one year, and (ii)
all outstanding stock options held by the participant shall immediately
become exercisable in full. Notwithstanding the foregoing, if a particular
change in control of the Company is approved in advance by the Board of
Directors of the Company, participants shall not be entitled to any of the
foregoing benefits. This Plan may be amended or terminated by the Board of
Directors at any time prior to the occurrence of a change in control. Amounts
payable to any employee under the Plan are reduced by amounts payable to such
employee under any other program or agreement under which he will receive
benefits.
The Company's employment agreement with Thomas H. Conway, Chief Executive
Officer of the Company, is described below under the heading "Certain
Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
The following table sets forth the beneficial ownership of the Company's
Common Stock as of May 31, 1996 (i) by each person who is known by the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) by each director, (iii) by each of the executive officers named
in the Summary Compensation Table set forth under the caption "Executive
Compensation" below, and (iv) by all current directors and executive officers
as a group.
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares Percentage of
Beneficially Common Stock
Name and Address Owned(1) Outstanding(2)
5% Stockholders
Tudor Trust(3) c/o Braverman Codron & Company
450 N. Roxbury Avenue Los Angeles, CA 90210 5,224,958 40.5%
James S. Saltzman(4) General Partner Saltzman
Partners 621 E. Germantown Pike Plymouth
Valley, PA 19401 1,675,991 18.7%
Other Directors
Thomas H. Conway(5). 325,000 3.6%
Leland S. Kollmorgen(6) 20,000 *
James L. McKenney(7) 8,000 *
18
<PAGE>
Other Senior Executives
Daniel M. Clarke 89,644 1.0%
James G. Hickey (8) 87,640 1.0%
Kevin J. Duffy(9) 73,876 *
Paul J. Woods(10). 15,500 *
All current directors and officers as a group (9
persons)(11) 2,225,157 23.5%
- ------------------------------------------------
</TABLE>
* Less than 1%
(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission by such stockholder of beneficial ownership of those
shares. Each stockholder possesses sole voting and investment power with
respect to the shares listed, except as otherwise indicated. For purposes of
this table, each person or entity listed is included as beneficially owning
any shares issuable upon the conversion of the Series B Stock or of the
Company's 6% Convertible Subordinated Debentures due 2002 (the "Debentures")
or upon the exercise of stock options or warrants or Debentures that are
currently exercisable or exercisable within 60 days after May 31, 1996.
(2) Number of shares deemed outstanding includes 8,844,099 shares
outstanding as of May 31, 1996, plus any shares issuable upon conversion of
Series B Stock or Debentures or subject to options or warrants held by the
person or entity in question that are currently exercisable or exercisable
within 60 days following May 31, 1996.
(3) Includes 3,875,000 shares of Common Stock issuable upon the exercise
of Common Stock Purchase Warrants, 117,458 shares of Common Stock issuable
upon conversion of Series B Stock and 66,000 shares of Common Stock issuable
upon conversion of Debentures. See "Certain Transactions" regarding
additional shares which may be acquired by Tudor Trust. Does not include
warrants for an aggregate of 10,000,000 shares of Common Stock of the Company
issued to Tudor Trust on June 13, 1996, of which warrants for 3,275,000
shares are currently exercisable and of which warrants for 6,725,000 shares
will be exercisable upon stockholder approval, and the filing, of an
amendment to the Company's Certificate of Incorporation increasing the number
of authorized shares.
(4) Includes 20,000 shares of Common Stock subject to stock options and
93,372 shares of Common Stock issuable upon conversion of Series B Stock
owned by Saltzman Partners, of which Mr. Saltzman is the General Partner.
(5) Includes 300,000 shares subject to stock options.
(6) Includes 19,000 shares subject to stock options.
(7) Consists of 8,000 shares subject to stock options.
(8) Consists of 87,640 shares subject to stock options.
(9) Includes 73,801 shares subject to stock options.
18
<PAGE>
(10) Consists of 15,500 shares subject to stock options.
(11) Includes a total of 543,091 shares subject to stock options and 93,372
shares issuable upon conversion of Series B Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
CERTAIN TRANSACTIONS
Under an employment agreement with Thomas H. Conway, Chief Executive
Officer of the Company, effective October 1, 1993, the Company has agreed to
pay T.H. Conway and Associates, Inc. the sum of $9,000 per month, plus
reasonable out of pocket expenses, plus $200 per hour for each hour of
services rendered to the Company in excess of 45 hours per week. This cash
compensation is in lieu of all non-cash benefits employees of the Company
normally receive (such as health insurance benefits and paid vacation time).
This agreement also provides that Mr. Conway may employ additional members of
T.H. Conway and Associates, Inc., a consulting firm of which he is a
principal, at specified rates, provided that the aggregate amount of
compensation and reimbursement of out-of-pocket expenses paid to such
employees may not exceed $50,000 per year without advance approval of the
Board of Directors. In January 1996, the Company agreed to pay T. H. Conway
and Associates, Inc. a maximum of $20,000 per month, plus reasonable out of
pocket expenses, for Mr. Conway's services. The Company has paid T. H. Conway
and Associates, Inc. $20,000 per month, plus reasonable out of pocket
expenses, for Mr. Conway's services since February 1996. In fiscal 1996, the
Company paid $182,200 and $4,650 to T.H. Conway and Associates, Inc. for
services of Mr. Conway and its employees other than Mr. Conway, respectively,
and an aggregate of $7,095 for reimbursement of expenses. In addition, each
member of the Board of Directors of the Company has signed an agreement that
they will not sue Mr. Conway or T.H. Conway and Associates, Inc. in
connection with the performance of services to the Company except for fraud,
malfeasance or gross negligence.
Mr. Conway is a general partner of CR Management LP, which has a fifty
percent equity interest in Document Management Solutions, Inc., a software
integration services company serving the publishing industry. The Company
paid Document Management Solutions, Inc. $64,632 in fiscal year 1996 for
integration services.
On June 30, 1992, the Company obtained a $2,000,000 line of credit with
Tudor Trust, a current investor in the Company. The line, which is payable on
demand, is secured by substantially all of the assets of the Company and has
been used for working capital and general business purposes. Interest on the
line of credit is payable monthly. The Company issued 400,000 shares of
Common Stock and a Common Stock purchase warrant for 100,000 shares of Common
Stock at an exercise price of $.50 per share to the Tudor Trust, for no
additional consideration upon signing of the line of credit. In addition, as
required by the line of credit, from September 30, 1992 through June 30,
1993, the Company granted the investor four additional Common Stock purchase
warrants, each covering 100,000 shares of Common Stock. On September 28,
1993, the Company and the investor amended the line of credit. Under the
terms of this amendment: (i) the amount available under the line of credit
was increased from $2,000,000 to $2,500,000; (ii) the annual interest rate
was reduced from 13% to 10%; and (iii) the term of the line of credit was
extended from June 30, 1994 to June 30, 1995. In consideration of such
changes, the Company: (i) reduced the exercise price of 200,000 and 100,000
Common Stock purchase warrants exercisable by Tudor Trust from $.50 and $.25
per share, respectively, to $.09 per share (the fair market value of the
Common Stock on September 28, 1993); (ii) issued 200,000 shares of Common
Stock and a warrant to purchase 300,000 shares of Common Stock at an exercise
price of $.09 per share
19
<PAGE>
to Tudor Trust for no additional consideration; and (iii) agreed to grant the
investor up to eight additional warrants, each covering 125,000 shares of
Common Stock at an exercise price at the lesser of the fair market value of
the Common Stock on the date of issue or $1.00 per share.
On December 3, 1993, the Company and Tudor Trust entered into an
additional amendment to the line of credit. Under the terms of this
amendment, the amount available under the line of credit was increased to
$3,000,000. In consideration of this change, the Company: (i) issued 100,000
shares of Common Stock and a warrant to purchase 500,000 shares of Common
Stock at fair market value of the Common Stock on December 3, 1993; and (ii)
agreed to grant Tudor Trust up to seven additional Common Stock purchase
warrants between December 31, 1993 and June 30, 1995, each covering 200,000
shares of Common Stock at an exercise price at the lesser of the fair market
value of the Common Stock on the date of grant or $1.00 per share (these
warrants are in lieu of the last seven of the warrants referred to in clause
(iii) of the preceding paragraph).
On February 29, 1996, the Company and Tudor Trust entered into an
additional amendment to the line of credit. Under the terms of this
amendment, the amount available under the line of credit was increased to
$4,000,000 and the term of the line of credit was extended to December 31,
1997. In consideration of these changes, the Company granted the Tudor Trust
a Common Stock purchase warrant for 200,000 shares of Common Stock at an
exercise price of $.10 per share (the fair market value of the Common Stock
on the date of issuance of such warrant) and agreed to continue to grant
Tudor Trust for each fiscal quarter for which amounts are outstanding under
the credit line a Common Stock purchase warrant for 200,000 shares of Common
Stock, provided that the number of shares subject to the warrant shall be
325,000 (rather than 200,000 shares) in the event that the maximum amount of
outstanding credit line advances on one or more dates during the quarter
ending on the issue date of such warrant exceeds $3,000,000. The exercise
price of the first five warrants (beginning with the warrant for the quarter
ended September 30, 1995) will be at the lesser of the fair market value of
the Common Stock on the date of the grant or $1.00 per share while the
exercise price of the final five warrants will be the fair market value of
the Common Stock on the date of the grant.
Late in fiscal 1996, management of the Company concluded that, due
principally to the significant losses from operations in the third and fourth
quarters of fiscal 1996 (which amounted to approximately $1.8 million and
$2.5 million, respectively), the Company's $4,000,000 credit line would be
insufficient to finance the Company's cash needs during the first quarter of
fiscal 1997. Accordingly, after investigating a number of alternative sources
of financing, the Company entered into an amendment to its line of credit
agreement with Tudor Trust, effective as of May 31, 1996, pursuant to which
(a) Tudor Trust agreed to (i) increase the maximum loan amount to $5,000,000,
(ii) reduce the interest rate on the line of credit from 10% to 8% per annum,
(iii) eliminate any borrowing covenants or conditions that would prevent the
Company from accessing the full $5,000,000 of available credit, and (iv)
eliminate the requirement for the issuance of additional warrants to Tudor
Trust under the line of credit (which were issuable on a quarterly basis),
and (b) in consideration therefor, the Company issued to Tudor Trust warrants
for 10,000,000 shares of Common Stock of the Company at an exercise price of
$.10 per share (representing the fair market value of the Common Stock of the
Company as of the date of warrant issuance). Of the warrants for 10,000,000
shares of Common Stock, warrants for 3,275,000 shares are currently
exercisable and warrants for 6,725,000 shares will be exercisable upon
stockholder approval and the filing of an amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares of
Common Stock. In connection with this line of credit amendment, Tudor Trust
exercised warrants for the purchase of 2,092,500 shares of Common Stock of
the Company for an aggregate purchase price of $200,000.
20
<PAGE>
On July 29, 1994, the Company entered into an exchange agreement with
Saltzman Partners, Tudor Trust and certain other parties relating to the 15%
Exchange Notes of the Company held by such stockholders. James S. Saltzman,
the General Partner of Saltzman Partners, is a director of the Company.
Saltzman Partners and Tudor Trust held 15% Exchange Notes in the principal
amounts of $1,087,500 and $630,000, respectively, which they exchanged upon
the terms set forth below. The Company entered into the exchange agreement in
order to relieve itself of the payment obligations on the 15% Exchange Notes,
which were to mature beginning September 30, 1994. Under the terms of the
exchange agreement, the Company issued the following securities to holders of
its 15% Exchange Notes in exchange for the delivery of its 15% Exchange Notes
for cancellation: (i) a new promissory note in a principal amount equal to
the principal amount of the 15% Exchange Note, which matures 30 months from
the date of issuance and bears interest at a rate of 4% per year; (ii) such
number of shares of the Company's Common Stock as is determined by dividing
the aggregate principal amount of the 15% Exchange Note delivered for
cancellation by $10.00; and (iii) such number of shares of Series B Preferred
Stock of the Company as is determined by dividing the accrued interest in the
15% Exchange Note delivered for cancellation by $10.00. Dividends of $.40 per
share accrue annually on the Series B Preferred Stock and are payable on a
quarterly basis. The Series B Preferred Stock has a liquidation preference of
$12.50 per share and is convertible into Common Stock at a rate of two shares
of Common Stock for each share of Series B Preferred Stock. Pursuant to the
exchange agreement, Saltzman Partners received a 4% Promissory Note in the
principal amount of $1,087,500, 108,750 shares of Common Stock and 46,686
shares of Series B Preferred Stock, and Tudor Trust received 4% Promissory
Notes in an aggregate principal amount of $630,000, an aggregate of 63,000
shares of Common Stock and an aggregate of 26,113 shares of Series B
Preferred Stock.
Tudor Trust and Saltzman Partners have presented to the Company the
following proposal relating to the exchange of Debentures and 4% Promissory
Notes for Common Stock of the Company: they, along with certain other holders
of the Debentures, would exchange their Debentures for such number of shares
of Common Stock of the Company as is equal to the sum of the principal amount
of the Debentures exchanged plus the accrued interest thereon, divided by
$3.33; and they, along with certain other holders of the 4% Promissory Notes,
would exchange their 4% Promissory Notes for such number of shares of Common
Stock of the Company as is equal to the principal amount of the 4% Promissory
Notes exchanged divided by $2.00 (any accrued but unpaid interest would be
paid in cash at the time of such exchange). The consummation of the exchange
transaction for the Debentures would be contingent upon the participation in
such exchange by the holders of at least 50% of the principal amount of the
outstanding Debentures; and the consummation of the exchange transaction for
the 4% Promissory Notes would be contingent upon the participation in such
exchange by the holders of at least 75% of the principal amount of the
outstanding 4% Promissory Notes. Together, Tudor Trust and Saltzman Partners
currently own approximately 41% of the principal amount of the outstanding
Debentures and approximately 45% of the principal amount of the outstanding
4% Promissory Notes. The Board of Directors of the Company has voted to
accept the terms of the exchange proposal made by Tudor Trust and Saltzman
Partners and to proceed with such exchange transactions, assuming the
requisite number of holders of the Debentures and 4% Promissory Notes agree
to the terms of such exchanges. While the Company believes that such exchange
transactions would be very beneficial to the Company and its stockholders and
would significantly improve the Company's balance sheet and liquidity
position, there can be no assurance that such exchange transactions will be
consummated.
21
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-K/A amending its Annual Report on
Form 10-K for the fiscal year ended March 31, 1996 to be signed on its behalf
by the undersigned, thereunto duly authorized.
XYVISION, INC.
Date: August 2, 1996
By: /s/ Eugene P. Seneta
Eugene P. Seneta
Vice President, Chief
Financial Officer,
Treasurer and Secretary
22
